Metal company turnaround attracts buyer

A once-troubled Fort Lauderdale metal processor, rebuilt from bankruptcy into a company with $2 billion in sales, could soon be part of the largest metal processing company in the nation.

Metals USA Holdings Corp., a provider of steel and metal products with operations around the country, announced Wednesday that Los Angeles-based Reliance Steel & Aluminum has offered $20.65 cents a share — or about $785 million in cash. With debt assumption, the transaction is valued at $1.2 billion.

"We're two very similar companies, even the way we approach business, even the way we treat people,'' said Lourenco Goncalves, Metals USA's chief executive, who moved the headquarters to Fort Lauderdale from Houston in 2008. "It's a great outcome.''

The companies process steel, aluminum and other metals for use in planes, pipes, construction, tractors and other products.

The acquisition has to be approved by regulators and shareholders, but 53 percent of Metals USA is owned by private equity firm Apollo Global Management, which already has agreed to the deal.

Metals USA is the nation's eighth-largest metals processor, according to industry publication Metal Service News. The company has 48 service centers in 33 states that process metal for the oil and gas, defense and aerospace, appliance, office furniture and automotive industries. Major clients include the Department of Defense, Carrier and John Deere, according to Goncalves.

The company's diversification helped it survive the recession. And now sales are climbing, he said. Even non-residential construction, which has been a difficult sector, "should be peaking in 2013," Goncalves said.

In Fort Lauderdale, Metals USA has just 18 headquarters employees, but the company has a total work force of more than 2,500 across the country.

Reliance has about $8 billion in annual sales and 11,500 employees. The company has grown primarily through its 54 acquisitions since its initial public offering in 1994.

Hannah credits Goncalves, who previously turned around California Steel Industries, with leading Metals USA during the past decade from bankruptcy to a company with $2 billion in annual sales.

Goncalves was hired to run the Houston-based company in 2003. He took the company private with Apollo in 2005, which allowed it to continue making acquisitions.

"We needed to continue to grow by acquisition. Sometimes it's easier to do these things out of the eyes of the public investor," he said.

But Hannah said Goncalves and his team also had to gain back the trust of steel mills, which it did, rebuilding the company's reputation in the industry. In 2010, Metals USA went public again and is listed on the New York Stock Exchange. The stock closed at $20.78, up 9 cents on Friday.

Meanwhile, Hannah and Reliance maintained a strong relationship with Goncalves and Metals USA. If approved, Metals USA would be its largest acquisition in price and number of locations.

After the deal closes, Metals USA will continue operating independently with its current management team except for Goncalves, who plans to retire after the deal closes, Hannah said.

Under the agreement, Metals USA also has 30 days to entertain other offers for the company.

Hannah said there is not much overlap in the companies' operations, with Metals USA more focused on the eastern side of the U.S. and Reliance Steel on the western states. But there would be cost savings from merging public-company functions, financing and purchasing costs, he said.

Goncalves said Metals USA's employees are in good hands with Reliance because the companies have "similar philosophies."

When he was named CEO of Metals USA 10 years ago, "there was a lot of talent. I hired less than five people," Goncalves said.